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With VAT, the taxable amount is based on the value added at each stage of the process of producing goods and bringing them to market. By imposing a tax on receipts but then allowing a credit for VAT taxes collected at earlier stages of production, the credit-invoice VAT taxes the “value added” by each business. The total tax, regardless of the stage of production at which it was collected, ends up being added to the final sales price. No matter how many steps there are in the production process, a fixed percent of the final price of the product would represent the value-added tax, just as a retail sales tax is a fixed percent of the final product price...
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